Study: Millennial’s Money Woes Are Due To Them Making Choices Out of Order

We are currently reading a flurry of articles trying to find an answer to the reasons why millennials, on the whole, are struggling financially compared to other generations at their ages. People are quick to pass blame in various ways, the decisions of baby boomers affecting the market beforehand to millennials’ purchasing habits to outside market forces making it difficult for millennials to hit many financial milestones. The answer is likely somewhere in the middle, but a recent CNBC News article, some lifestyle trends may be hurting their financial standing.

The major notable trend here is that 55 percent of millennial parents have had children before getting married — compared to 25 percent of the youngest baby boomers who did the same. Notably, data from the Bureau of Labor Statistics’ Panel data by the American Enterprise Institute (AEI) and the Institute for Family Studies (IFS), is showing that “the most financially successful young adults today continue to be those who put marriage before the baby carriage.”

Some may believe that this is a case of confounding statistics. Are people from lower-income families likely to have children before getting married, resulting in staying at this lower income? Not entirely. “Even millennials from low-income families are more likely to flourish if they married before having children: 71 percent who married before having children made it into the middle or higher end of the income distribution by the time they are age 28 to 34,” the AEI and IFS report.

“By comparison, only 41 percent of millennials from lower-income families who had children first made it into the middle or higher end of the distribution when they reached ages 28 to 34.” This lends credence to the idea of a “success sequence,” which was first introduced by Ron Haskins and Isabel Sawhill of the Brookings Institution in 2009. This says that the best way to get to economic success, and away from poverty, is through three steps in a certain order. 1) Earn at least a high school diploma, 2) get a full-time job, and 3) marry before having kids.

“Only three percent of millennials who followed all three steps, in sequence, are poor by the time they reach their late 20s or early 30s,” according to the AEI and IFS. Granted, this is easier said than done in poorer communities with lesser education resources. With this said, there is no guarantee, as the report notes that there are examples of young adults who miss all three steps managing to succeed, and those who “do everything right” hitting the bottom third of income.